Government Extends Deadline For Pending Solar And Solar Wind Hybrid Projects

In an official letter addressed to management at SECI, NTPC and NHPC, the Ministery of New and Renewable Energy (MNRE) has extended  the deadline up to March 2024 for under implementation solar and solar wind hybrid projects. the new deadline is applicable for project bids finalized before March 9,2021. As per the announcement made by the MNRE on 9th March, 2021 any import of solar modules from 1^st April 2022 would attract basic customs duty (BCD) of 40% and import of solar cells would attract BCD of 25%.

However, there are several projects for which bids were finalized by SECI, NHPC and NTPC, before the said announcement. It should be noted that, usually these projects would have been completed within 24 months, with most procurement done before the new BCD rules came into effect, but COVID disrupted the supply chain resulting in the delay of projects.

Notably, a decision on any duty exemption for bids that were finalized before the announcement of customs duty is pending. In the mean time, the extended completion dates of many projects have expired, stated the press release.

Industry insiders have welcomed the move by MNRE as they believe that there was a need to address the supply chain disruption  as the domestic manufacturing was hindered due to COVID. However, there are concerns expressed by experts regarding  BCD applicability for these projects as  any additional costs incurred by project developers will be endured by them directly. Moreover, the experts believe that despite the applicability dates being extended, many of these projects will not be viable with the additional custom duty , if they have to pay that. Domestic availability and prices are well above import options currently.

The solar power industry is already witnessing a sharp rise in module prices in the last two years. As per report by the Institute of Energy Economics and Financial Analysis, solar module costs constitute 65% of the initial capital expenditure of any usual solar project. Thus, any increase in the cost of solar modules can significantly increase the total cost of the project.

Though the government intends to boost the domestic market by increasing the import duties on the modules, the domestic industry is still picking pace, and prices remain enhanced. That, and the condition to use only module manufacturers listed under the  Approved List of Modules and Manufacturers (ALMM) since October 1 last year has effectively stymied many developers from moving ahead on stalled projects.

Thus, the time extension meets just one part of the developer side expectation from the government. In the budget, hopes are pinned on a duty exemption to these projects, or even a broader exemption of lower rates to support projects at lower costs, and hence, faster capacity building. At just over 61 GW in total, India is already well behind its stated solar target for 2022-23 (100 GW) , as well as 2030(280 GW)  now, going by the pace of capacity additions currently.

The view, the official letter, click here